Can New Leadership Transform Dell’s Services Business?

Dell, the integrated technology solutions provider, has announced the appointment of Suresh Vaswani as president of Dell Services, instead of Steve Schuckenbrock, who is leaving the company in late March after a period of transition.

Vaswani joined last year as chairman of its Indian operations and executive vice-president of Dell Services. With the new role, Vaswani will be reporting directly to Michael Dell and will be responsible for developing and delivering end-to-end IT services and business solutions for global corporations, state and local governments.

The third-largest maker of personal computers (PCs) has been attempting to grow a portion of its revenue from the demanding software and outsourcing business, a market dominated by multinational rivals such as IBM, Accenture and Indian firms including TCS, Infosys Ltd and Wipro.

Evolution of Dell Services

Michael Dell changed the computer industry, where his company reigns in the supply chain management behind direct sales and streamlined manufacturing.  Although this model has successfully worked for 20 years, the growing popularity of tablets and smartphones put a noticeable dent in Dell’s PC sales. Dell profits continued to fall, and the company slipped to number three in worldwide PC shipments.

Michael Dell then decided to transition the hardware manufacturer into a provider of IT-solutions. The strategy shift was followed by a series of key acquisitions, which allowed Dell to create a portfolio in the areas of software development, data storage, network and computer security.

Dell entered the IT services business with the purchase of Perot Systems in 2007 for $3.9 billion. Dell Services division is a key to Dell’s fortunes. The company is making huge strides transforming it into a leading provider of end-to-end solutions.

Dell Services then expand its portfolios to develop and deliver a comprehensive suite of services and solutions in applications, business process, consulting, infrastructure and support to help customers.

Diversified Portfolio

Dell is trying to develop software that facilitates the management of terminals and PCs, and enhance their security. The company is also betting on appliances and servers that integrate business intelligence, and are capable of providing cloud services. The PC vendor wants to bring its modes of services with the hardware, and offer packages that instantly offer IaaS and SaaS solutions and priority management software for mobile devices.

“At Dell World this week, we’re talking about the disruptive forces that our customers are facing, such as cloud, social media, mobility, data and security,” said Suresh Vaswani, president, Dell Services.

“This year we’ve seen enterprises turn increasingly to Dell Services to help modernize and adapt their IT environments to manage the growing challenges and opportunities presented by these disruptive forces. More and more, our customers are recognizing the power of information technology and services in enabling their business outcomes.”

To do this, Dell plans to use software technologies inherited from Kace, SonicWall and Wyse. At Dell World 2012, Dell unveiled a new mobile solution that aims to make it easier for enterprises to manage employee-owned devices in the enterprise. The new K3000 appliance offering supports phones and tablets running iOS 4.5 and Android 2.2 or higher.

In an effort to grow its services further, Dell unveils solutions on cloud, social media, mobility, data and security at Dell World 2012. Dell SecureWorks is teaming with FireEye, a leader in advanced threat protection, to protect customers from advanced cyber-attacks.

Dell also revealed new SupportAssist technology to provide proactive support for Dell PowerEdge servers, PowerVault storage arrays and PowerConnect switches. SupportAssist will help remote monitoring, automatic case creation and data collection, as well as proactive parts dispatch with customer consent.

The company also launched a new Storage Consulting Accelerators service for storing, protecting and archiving massive amounts of data. The service aims to help narrow the gap for developing an integrated custom data management solution with sound cost/benefit analysis.

Revenue Slump

Dell is attempting to transform its business as the computer giant moves beyond selling just consumer hardware and into more profitable businesses such as storage and software. Dell services account for just 13% of the company’s revenue, and contributes to 29% of its market cap.

Last month, Dell reported a $475 million profit on revenue of $13.7 billion during its third quarter, against an $893 million profit and revenue of $15.3 billion during the third quarter fiscal 2011.

The company wants more growth from the sale of advanced systems, software and services to large and mid-sized businesses. That operation accounts for more than half of its profits so far this year, but accounts only for about a third of Dell’s total revenue.

Recently, the company pursued a policy of frantic acquisitions, buying eight companies over the last 12 months to boost revenue of its Services business. These acquisitions include the security firm SonicWall and Wyse Technology, which sells thin clients and virtualization software and Kace, SecureWorks, AppAssure, Scalent, Make Technologies, Clerity and Boomi under Quest.  We heard more about Wyse’s integration into Dell’s broadening portfolio from its former CEO Tarkan Maner, who now serves as VP and GM of client computing at Dell, when Maner stopped by #theCube at Dell World 2012.

With all these acquisitions, Dell is investing in its services segment, with a focus on cloud computing and enterprise software as the company tries to leverage its large, installed base of PCs, servers, and data storage systems.

What’s missing?  Simplified product lines

Dell’s acquisition spree over the past few years has helped reshape its strategy. But while Dell thinks it is moving in the right direction, analysts said it has been slow to pull together solutions and assets from the acquisitions to simplify product lines.

Many of the acquired companies are still operating independently and don’t offer a converged product yet, which is hurting Dell’s long-term plan to expand product sales. Quest is one solution that offers a range of software for database management, data protection, virtualization, compliance and security, but Dell is yet to build a cohesive software strategy around Quest.

“A transition like this is not easy, and inevitably there will be a period where the gap is glaring,” said Roger Kay, principal analyst at Endpoint Technologies Associates. “It could take another five years for it to reach some kind of critical mass that will support the company’s cost structure.”

It will be a tough road ahead for Vaswani to re-engineer all their products and can be harder than building new enterprise-focused products and services. Dell’s interesting products can help to create a portfolio aligned with cloud, security focus and systems management.